Say Hello to Triple Witch!

Discussion in 'Trading' started by waggie945, Mar 17, 2004.

  1. Starting today.

  2. Ditch


    A slow creeper isn't exactly what i was looking forward to.:mad:
  3. The Witch usually shows up in slow continuous creepers.
    That is her standard MO.

    By the way, the SPX has been testing its 89-day moving average now for 4 days ( 1107 ). This moving average has kept the entire rally phase intact since April of 2003.

    A successful test of this MA could lead the SPX to a sharp retracement of this break, with a 38.2% retracement coming in at around the 1125 level.

    50% would get you 1133.00
  4. Ditch


    No kidding? I always associated TW with wild volatility, but i'll keep in mind.:)
  5. Absolutely no volatility whatsoever.
    Most Triple Witches are characterized by slow and steady pushes higher, much higher as market-makers and proprietary traders on the equity derivative desks of investment banks "unwind" their positions over the course of several days.

    By the time Friday rolls around, volatility will be totally dead.
    There will be HUGE volume, but everything is usually "paired-off".
    As a result, no volatility.

    Go back over the last 5-6 years and take a look at the week leading up to a Triple Witch Expiration and you will see what I am talking about.
  6. CalTrader

    CalTrader Guest

    Continuous creeepers ... Hmm .....

    Well if you look at the data, volatility on expiration day is actually about 50% greater than normal for the first couple of hours. I'm not sure which sets of data are being looked at by some people but it isn't equities.
  7. someone please explain triple witch. i only vaguely know about it. like, my knowledge is that a bunch of changes take place.

    what changes take place?

    when does it happen, and when it does, does it happen all day, end of day??!

  8. prox


    My vague (probably flawed) interpretation is:

    Contracts are being exercised, large money hedgers are switching to the next contract so they have to liquidate their existing contracts. Therefore, it creates some false type of moves.. for example, large money shorts covering their positions by buying. This causes the market is go up, but remember this is exiting a position and not meant to imply an uptrend. Therefore, the upmove usually has no followthrough when the lemming traders pile in. Therefore, one should expect a decent sized ranged type of day with minimal followthrough. Rallies get sold into, dips get bought.

    fwiw, this gap up today is not optimal for longs to start building positions either - so it would not surprise me to see today's rally fail today or early tommorrow.
  9. It is the expiration of stock-index options, stock-index futures, and equity options . . . hence Triple Witch.

    The March S&P Futures will expire Thursday on the close, but the "settlement" price of the contract is calculated by taking the opening values of each component member of the S&P 500 Index to construct a special cash "settlement" value.

    The issue as to whether market participants will roll into the next contract ( ie., in this case from March S&P Futures to June ) will be based upon the "spread" of how the "about-to-expire" contract is trading vs the contract that is about to be rolled into, and whether or not it will be advantageous for them to roll, or not, vis-a-vis their cash portfolio.
  10. Ragnar


    Triple witching is when contracts for stock index futures, stock index options, and stock options all expire on the same day. Triple Witching Days happen four times a year: the 3rd Friday of March, June, September, and December.
    #10     Mar 17, 2004